by Santander will nudge up rates by up to 0.20 percentage points on some fixed rate products from Wednesday.
It bucks wider trends with Nationwide among the latest to reduce rates.
Analysts said they still expect the benchmark interest rate to be cut this year despite worries about inflation.
The move by Santander came after official figures recently showed that inflation, which measures the rate at which prices rise, unexpectedly ticked up to 4% in December.
“Lenders’ margins at the moment are tight, so this increase will be expected,” said Elliott Culley, director of Switch Mortgage Finance.
“Borrowers should not panic as its unlikely this will be a trend and overall across the year, predictions are for rates to fall further”.
Mortgage rates hit record highs in 2023 as the Bank of England raised interest rates in an attempt to rein in rising prices.
In theory, by making borrowing more expensive and dissuading people from taking out loans, such moves cool down the economy, easing pressures pushing up prices.
But the higher interest rates also led some landlords to increase rents and made homebuying more expensive, exacerbating what has been described as a cost-of-living crisis.
About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year and are facing the prospect of more expensive deals.
More recently, however, as prices have eased, many lenders have been cutting rates, providing some relief.
The average rate on a two-year fixed deal has dropped to 5.62% compared with 5.93% at the start of the year, according to financial information service Moneyfacts.
“While rates are not as cheap as they used to be, they are significantly better than they were”, said Aaron Strutt from Trinity Financial.
“We have been saying for a while that rates may start to level off and there may not be many more price reductions for a while, but the pricing improvements keep coming”.
Britain’s biggest building society, Nationwide, on Wednesday said that its new products would include a five-year fixed-rate mortgage at 3.85% for new customers with a 40% deposit who are moving home. The deal has a £1,499 fee.
But its chief economist, Robert Gardiner, warned that upheaval in the Red Sea was “part of a broader picture of uncertainty”, and could pose a “serious risk” to inflation in the UK if it starts to impact trade significantly.
Some analysts said that Santander’s move to raise rates might be precautionary, amid predictions that the Bank of England may not cut rates as early as some have forecast.
A Santander spokesman said that the lender “reviews its rates based on a number of factors, such as wider market conditions including swap rates”, which are a leading indicator for mortgage rates.
